v3.26.1
Fair Value Measurements
 9 Months Ended
Jun. 30, 2026
Fair Value Measurements [Abstract]  
Fair Value Measurements

Note 4. Fair Value Measurements

 

The Company follows ASC 820 for measuring the fair value of portfolio investments. Fair value is the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters, or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation models involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments’ complexity.

 

The Company’s fair value analysis includes an analysis of the value of any unfunded loan commitments. Financial investments recorded at fair value in the consolidated financial statements are categorized for disclosure purposes based upon the level of judgment associated with the inputs used to measure their value. The valuation hierarchical levels are based upon the transparency of the inputs to the valuation of the investment as of the measurement date. Investments which are valued using NAV as a practical expedient are excluded from this hierarchy, and certain prior period amounts have been reclassified to conform to the current period presentation. The three levels are defined below: 

 

●Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities at the measurement date.

 

●Level 2 - Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

 

●Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

 

In addition to using the above inputs in investment valuations, the Company continues to employ a valuation policy approved by the board of directors that is consistent with ASC 820 (see Note 2). Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading, in determining fair value. 

 

The following table presents the fair value measurements of our investments, by major class according to the fair value hierarchy, as of June 30, 2026 (dollars in thousands): 

 

   Fair Value Hierarchy as of June 30, 2026 
Investments:  Level 1   Level 2   Level 3   Total 
Senior Secured First Lien Term Loans  $
-
   $21,250   $98,197   $119,447 
Senior Secured Notes   
-
    8,115    6,997    15,112 
Equity/Warrants   24,295    
-
    140,371    164,666 
Total  $24,295   $29,365   $245,565   $299,225 
Investments measured at net asset value(1)                  2,412 
Total Investments, at fair value                 $301,637 

 

(1)Certain investments that are measured at fair value using NAV have not been categorized in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the amount presented in the Consolidated Statements of Assets and Liabilities.

The following table presents the fair value measurements of our investments, by major class according to the fair value hierarchy, as of September 30, 2025 (dollars in thousands): 

 

   Fair Value Hierarchy as of September 30, 2025 
Investments:  Level 1   Level 2   Level 3   Total 
Senior Secured First Lien Term Loans  $
-
   $27,586   $88,981   $116,567 
Senior Secured Notes   
-
    10,460    6,997    17,457 
Equity/Warrants   37,812    
-
    128,209    166,021 
Total  $37,812   $38,046   $224,187   $300,045 
Investments measured at net asset value(1)                  2,227 
Total Investments, at fair value                 $302,272 

 

(1)Certain investments that are measured at fair value using NAV have not been categorized in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the amount presented in the Consolidated Statements of Assets and Liabilities.

 

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the nine months ended June 30, 2026 (dollars in thousands):

 

    Senior Secured First Lien Term Loans     Senior Secured Notes     Equities/ Warrants     Total  
Balance as of September 30, 2025   $ 88,981     $ 6,997     $ 128,209     $ 224,187  
Purchases and other adjustments to cost     26,302       -       15,592       41,894  
Sales (including repayments or maturities)     (11,143 )     -       (7,174 )     (18,317 )
Net realized gains/(losses) from investments     19       -       679       698  
Net unrealized gains/(losses)     (5,962 )     -       3,065       (2,897 )
Transfer in/(out)     -       -       -       -  
Balance as of June 30, 2026   $ 98,197     $ 6,997     $ 140,371     $ 245,565  

 

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the nine months ended June 30, 2025 (dollars in thousands): 

 

   Senior Secured First Lien Term Loans   Senior Secured Notes   Equities/ Warrants   Total 
Balance as of September 30, 2024  $68,987   $7,422   $63,881   $140,290 
Purchases and other adjustments to cost   66,391    
-
    76,653    143,044 
Sales (including repayments or maturities)   (35,192)   
-
    (12,983)   (48,172)
Net realized gains/(losses) from investments   (11,617)   
-
    (1,771)   (13,388)
Net unrealized gains/(losses)   9,617    
-
    (3,069)   6,545 
Transfer in/(out)   (7,883)   
-
    (112)   (7,995)
Balance as of June 30, 2025  $90,303   $7,422   $122,599   $220,324 

 

Net change in unrealized gain (loss) for the nine months ended June 30, 2026 and 2025 included in earnings related to Level 3 investments still held as of June 30, 2026 and 2025 was approximately $(2.0) million and $ (4.6) million, respectively.

 

Purchases and other adjustments to cost include purchases of new investments at cost, effects of refinancing/restructuring, accretion/amortization of income from discount/premium on debt securities, and PIK.

 

Sales represent net proceeds received from investments sold, including any repayments or maturities.

A review of the fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in/out of the Level 3 category as of the beginning of the quarter in which the reclassifications occur. During the nine months ended June 30, 2026 and June 30, 2025, zero and two investments were transferred out of Level 3, respectively.

 

The following table presents the quantitative information about Level 3 fair value measurements of our investments, as of June 30, 2026 (dollars in thousands): 

 

   Fair Value   Valuation
Methodology		  Unobservable
Input		  Range
(Weighted Average)		  Impact to
Valuation From
An Increase In
Input
Senior Secured First Lien Term Loans  $79,635   Income Approach  Market Yield  5.0% - 19.2% (12.3%)  Decrease
Senior Secured First Lien Term Loans   11,027   Market Approach  EBITDA Multiple  3.1x - 5.5x (3.6x)  Increase
Senior Secured First Lien Term Loans   7,535   Recent Transaction  Purchase Price  N/A  N/A
Senior Secured Notes   6,997   Cost Approach  Collateral Value  N/A  N/A
Equity/Warrants   

58,416

   Market Approach  Price/TBV Multiple 

1.1x -2x (1.7x)

  Increase
Equity/Warrants   

35,309

   Cost Approach  Replacement Cost  N/A  N/A
Equity/Warrants   32,665   Market Approach  EBITDA Multiple  3.1x - 11.0x (8.8x)  Increase
Equity/Warrants   

7,255

   Income Approach  Market Yield 

7.5% - 16.5% (12.3%)

  Decrease
Equity/Warrants   6,626   Market Approach  Revenue Multiple  3.3x - 4.3x (3.8x)  Increase
Equity/Warrants   100   Cost Approach  Collateral Value  N/A  N/A
Total  $245,565             

 

The following table presents the quantitative information about Level 3 fair value measurements of our investments, as of September 30, 2025 (dollars in thousands):

 

   Fair Value   Valuation
Methodology		  Unobservable
Input		  Range
(Weighted Average)		  Impact to
Valuation From
An Increase In
Input
Senior Secured First Lien Term Loans  $74,485   Income Approach  Market Yield  3.3% - 14.5% (10.0%)  Decrease
Senior Secured First Lien Term Loans   13,428   Market Approach  EBITDA Multiple  1.8x - 2.8x (2.3x)  Increase
Senior Secured First Lien Term Loans   997   Market Approach  Market Spread  4.8% - 5.5% (5.1%)  Increase
Senior Secured First Lien Term Loans   71   Recent Transaction  Purchase Price  N/A  N/A
Senior Secured Notes   6,997   Cost Approach  Collateral Value  N/A  N/A
Equity/Warrants   78,255   Market Approach  EBITDA Multiple  1.3x - 13.0x (11.0x)  Increase
Equity/Warrants   37,181   Cost Approach  Replacement Cost  N/A  N/A
Equity/Warrants   3,948   Market Approach  Market Quote  N/A  N/A
Equity/Warrants   6,000   Market Approach  Revenue Multiple  2.5x-3.0x (2.8x)  Increase
Equity/Warrants   2,725   Income Approach  Market Yield  28.3% - 28.8% (28.5%)  Decrease
Equity/Warrants   100   Cost Approach  Collateral Value  N/A  N/A
Total  $224,187             

 

The significant unobservable inputs used in the fair value measurement of the Company’s debt and derivative investments are market yields. Increases in market yields would result in lower fair value measurements.

 

The significant unobservable inputs used in the fair value measurement of the Company’s equity/warrants investments are comparable company multiples of revenue or EBITDA for the latest twelve months (“LTM”), next twelve months (“NTM”) or a reasonable period a market participant would consider. Increases in EBITDA multiples in isolation would result in higher fair value measurement.